European Food & Agri companies are expected to take on key positions in the growing global market for bioplastics. Opportunities arise from their access to bioplastic feedstock, such as sugar and starch. According to a recent report from Rabobank, Bioplastics Moving to the Beet, the demand for bioplastics in the EU could in fact require 1.2 million tonnes of sugar by 2020. Some F&A companies are already involved in bioplastics supply chains, while others are still exploring the possibilities. F&A companies with ethanol production capacity may benefit from the growth of drop-in bioplastics in the short term, but in the long run, higher revenues can be expected from investing in functional bioplastics.

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“Bioplastics have drawn the interest of twogroups of companies in the F&A sector: those who want to package their food and beverages in bioplastic and those who want to supply the feedstocks to make it,” said Rabobank analyst, Paul Bosch. “Bioplastics show the highest growth projections when it comes to potential demand for EU sugar. Rabobank estimates a CAGR of up to 40 percent; significantly higher than the 5percent expected in bioethanol and the flat outlook for food markets”.

With access to a key feedstock for bioplastics, European sugar and starch producers are well-positioned to play a leading role in the development of bioplastics. Food packaging boasts the largest share in the total plastics market, and thereby has the greatest opportunities in terms of volume sales. Sugar companies are currently focussing on three routes to get involved. Firstly, ‘drop-in’ bioplastics production such as bio-ethylene to add a touch of green to fossil-based plastics like Polyethylene Terephthalate (PET) and Polypropylene (PP). Secondly, the development of a 100% bio-PET bottle spearheaded by the ambitions of leading beverage companies to sell their beverages in 100% biobased bottles. A third group of companies is looking for possibilities outside of plastic bottles that provide higher value functional equivalents, such as being biodegradable.

As competition in EU sugar markets is expected to increase after 2017, a diversified strategy could especially be important for companies in these sectors. For example, in sugar, revenue growth is limited in food and beverage applications due to already high per capita consumption and limited population growth. Sugar could also be partially replaced by isoglucose in food and drink as a result of the quota abolition coming into effect in 2017. Furthermore, under the Renewable Energy Directive, the European Commission (EC) is seeking to cut the EU-wide 2020 biofuels targets by 50 percent, limiting growth for food crops, such as sugar beet.

For any company investing in bioplastics, a reliable demand forecast is essential. While demand figures are currently hard to find, it will be heavily influenced by the affordability of bioplastics over fossil-based products; a price premium currently borne by brands that have already invested in a greener image. Those companies that carefully define their execution strategies into bioplastics, and particularly those that form knowledge-sharing partnerships with established polymer producers, will benefit from the higher prices associated with new, improved plastics.

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About Rabobank Food & Agribusiness Research

About Rabobank Group and Rabobank Food & Agribusiness Research and Advisory

Rabobank is a Netherlands based, international financial services provider operating on the basis of cooperative principles. It offers retail banking, wholesale banking, private banking, leasing and real estate services. As a cooperative bank, Rabobank puts customers’ interests first in its services. Rabobank is committed to being a leading customer-focused cooperative bank in the Netherlands and a leading food and agri bank worldwide with assets totalling at 670 billion euro. The organisation has approximately 52,000 employees worldwide and operates in 40 countries.

Rabobank is the unrivalled market leader in the agricultural sector in the Netherlands. Its international strategy Banking for Food is aimed at increasing the availability of food, improving the access to food, promoting healthy nutrition and enhancing the stability of the food industry through its international activities.

Rabobank Food & Agribusiness Research and Advisory (FAR) is Rabobank’s global F&A Knowledge Provider. FAR comprises a global team of more than 80 analysts that continuously accumulates knowledge in major F&A sectors, issues and trends.